Bitcoin Price Support And Resistance Levels, Made Easy

Monday's drop in the price of bitcoin may or may not have been the result of a Korean hacking attempt, but if you've been watching the charts closely it might not have been wildly surprising. The benefit of chart reading -- aka technical analysis -- is the ability clearly identify trend and to locate where probable support and resistance levels may be lurking. No magic: just "it's headed this way" and "here's where buyers entered last time around."

This is true of any market for just about anything that has a price that fluctuates: stocks, bonds, gold, oil, the dollar, the yen, the Euro and, these days, crypto currencies. The history of bitcoin is short relative to those other assets and currencies, but there's enough price information already to begin to form some judgements and draw certain conclusions.

Here's the hourly chart where the Sunday night/Monday morning plunge is most apparent:

Bitcoin chart, hourly.finviz.com

The previous week's 7400 support level -- where buyers had shown up and stopped a drop -- got taken out and then it just kept going. From 7800 at the beginning of June to 6400 by the 13th of June. that's a fast 18% hit. It's just the sort of action you might see on a stock chart after quarterly earnings disappointed.

Bitcoin daily chart.FinViz.com

On the daily bitcoin chart above, you can see the price has taken out the April lows and the next significant level for support is the February lows of just below 6000. That's the last time enough buyers came in to stop the selling. That support level held back mid-November of 2017. A few closes below that spot and then that mid-October 4000 low might be the next target.

Bitcoin weekly chart.FinViz.com

It's a chart like this that should give you pause about investing in or trading this new currency of crypto. This is a classic picture of the way in which speculative frenzy takes off and then inevitably fades. Zero to almost 20,000 and then back to 6000. Good luck.

Anyway, you can see that early 2018 spike down to 4000 -- that's the next, most obvious support level. Below that is the 2017 low of 2000.

Here's the monthly chart for an even better picture of the amazing run:

Bitcoin monthly chart.FinViz.com

That late 2013 high is interesting. One analysis I've been hearing from crypto enthusiasts is that we're undergoing a dramatic re-enactment of that type of formation here at this much higher level. But that is pure speculation. From a pure technical analysis standpoint, that high way back there might be a support level to watch if the plunge were to continue.

I'd like to say that such a move is unlikely but with a relatively new market that's this speculative and which moves this dramatically, you never know. At the other end of it, a ton of resistance is likely up there at that 20,000 level if bitcoin gets there again.

I do not hold positions in this investment. No recommendations are made one way or the other. If you're an investor, you'd want to look much deeper into this situation. Always do your own independent research, due diligence and seek professional advice from a licensed investment adviser.

My Marketocracy work is profiled in The Warren Buffetts Next Door: The World's Greatest Investors You've Never Heard Of by Forbes Investments Editor Matt Schifrin. I'm a 1972 graduate of the University of North Carolina.